econ130 EXAM 1 (ch1,2,3)
A. A more stable macroeconomy with fewer recessions.
B. Firms are better able to attract inputs, as these inputs do not have to share the risk.
C. Government agencies are better prepared to help when businesses fail.
D. Consistently lower prices for consumers.
A. It encourages more people to become entrepreneurs.
B. Firms have to pay more to attract inputs, as these inputs have to share the risk.
C. Firms focus attention on prudent risk management, as it is profitable to manage risk.
D. Income becomes more equally distributed.
A. labor markets are geographically segmented.
B. unskilled workers outnumber skilled workers.
C. workers specialize in various production tasks.
D. each worker performs a large number of tasks.
C. Sole proprietorships.
D. In all of the businesses listed in the other answers.
A. realize an economic profit of $10.
B. realize an economic profit of $4.
C. not earn any economic profit.
D. shut down rather than incur a loss by producing.
A. allows everyone to have a job that he or she likes.
B. permits the production of a larger output with fixed amounts of resources.
C. facilitates trade by bartering.
D. guarantees full employment.
A. firm owners and employees share business risk more or less equally.
B. a firm’s employees and suppliers are largely shielded from risk.
C. employees and suppliers face the greatest risks because firms can shut down without notice and leave them unpaid.
D. a firm’s owners are largely shielded from risk because they can walk away from the business at any time.
A. creative destruction.
B. derived demand.
C. capital accumulation.
D. the difference between normal and economic profits.
A. Insurance inhibits economic growth and investment by discouraging risk-taking.
B. Insurance transfers risk from those with a high tolerance for risk to those with a low tolerance for risk.
C. Insurance companies always earn profits because insurance premiums always exceed the payout for insured events.
D. Insurance transfers risk from those with a low tolerance for risk to those with a higher tolerance for risk.
A. goods and resources respectively.
B. money incomes and output respectively.
C. output and money incomes respectively.
Correct D. resources and goods respectively.
Correct A. is one of the few remaining command economies.
B. has grown much faster than South Korea’s economy since the two countries were divided after World War II.
C. produces a per capita GDP of nearly $25,000.
D. has undergone significant market reforms and is now one of the fastest-growing economies.
A. Fur coats.
B. Ocean cruises.
Correct C. Used clothing.
A. there are many goods that are substitutes for bicycles.
B. there are many goods that are complementary to bicycles.
C. there are few goods that are substitutes for bicycles.
Correct D. bicycles are normal goods.
A. $1.10, that is, $1.60 minus $.50.
Correct B. $1.60.
A. Realizing allocative efficiency implies that productive efficiency has been realized.
B. Productive efficiency can only occur if there is also allocative efficiency.
C. Society can achieve either productive efficiency or allocative efficiency, but not both simultaneously.
D. Productive efficiency and allocative efficiency can only occur together; neither can occur without the other.
A. price is below the equilibrium level.
B. the supply curve is downward sloping and the demand curve is upward sloping.
C. the demand and supply curves fail to intersect.
Correct D. consumers want to buy less than producers offer for sale.
A. An increase in supply.
B. An increase in demand.
C. A decrease in supply.
D. A decrease in demand.
A. the substitution effect.
Correct B. the income effect.
C. the price effect.
D. a rightward shift in the demand curve for hamburgers.
A. Price ceilings cause goods to be rationed.
Correct B. Price ceilings cause goods to be rationed by some other means than legally determined market prices.
C. Ration coupons are the only way to ration goods when price ceilings are in place.
D. All of the other statements are correct.
A. by small annual increases in supply accompanied by large annual increases in demand.
B. in terms of a stable supply curve and increasing demand.
Correct C. in terms of a stable demand curve and increasing supply.
D. as an exception to the law of supply.
A. A only.
B. B only.
C. C only.
Correct D. D only.
A. product price has fallen so consumers move down to a new point on the demand curve.
Correct B. the quantity demanded at each price in a set of prices is greater.
C. the quantity demanded at each price in a set of prices is smaller.
D. a leftward shift of the demand curve has occurred.
A. provided there is no surplus of the product.
B. at all prices above that shown by the intersection of the supply and demand curves.
Correct C. if the amount producers want to sell is equal to the amount consumers want to buy.
D. whenever the demand curve is downsloping and the supply curve is upsloping.
A. there is currently a surplus of the relevant product.
Correct B. government is imposing a legal price that is typically below the equilibrium price.
C. government wants to stop a deflationary spiral.
D. government is imposing a legal price that is typically above the equilibrium price.
A. tend to cause the price of D to fall.
B. shift the demand curve of C to the left and the demand curve of D to the right.
Correct C. shift the demand curve of D to the right.
D. shift the demand curves of both products to the right.
A. price A.
B. quantity E.
Correct C. price C.
D. price B.
Correct A. reduced taste for the good.
B. an increase in input prices.
C. consumers expecting that prices will be lower in the future.
D. government subsidizing production of the good.
Correct A. increase in demand.
B. decrease in demand.
C. increase in supply.
D. decrease in supply.
A. will necessarily remain unchanged.
Correct B. may shift either to the right or left.
C. will necessarily shift to the right.
D. will necessarily shift to the left.
A. $10 and 60 units.
B. $9 and 50 units.
Correct C. $8 and 60 units.
D. $7 and 50 units.
A. the upward-sloping supply curve.
Correct B. the downward-sloping demand curve.
C. movements along a given supply curve.
D. shifts in the demand curve.
A. consumer goods are produced in the private sector and capital goods are produced in the public sector.
B. an economy that commits a relatively large proportion of its resources to capital goods must accept a lower growth rate.
C. the production of capital goods is not subject to the law of increasing opportunity costs.
Correct D. consumer goods satisfy wants directly while capital goods satisfy wants indirectly.
Correct A. benefit exceeds its marginal cost.
B. cost exceeds its marginal benefit.
C. cost equals its marginal benefit.
D. benefit is still better.
A. the slope only.
B. the intercept only.
C. both the slope and the intercept.
D. neither the slope nor the intercept.
Correct A. production possibilities curve indicating constant opportunity costs.
B. production possibilities curve indicating increasing opportunity costs.
C. demand curve indicating that the quantity of consumer goods demanded increases as the price of capital falls.
D. technology frontier curve.
A. a constant 8 units of tractors.
B. a constant 6 units of tractors.
Correct C. 1/8, 1/6, 1/4, and 1/2 units of tractors.
D. 1/2, 1/4, 1/6, and 1/8 units of tractors.
Correct A. if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so.
B. the sum of the costs of producing a particular good cannot rise above the current market price of that good.
C. if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must rise by a greater relative amount.
D. if the prices of all the resources used to produce goods increase, the cost of producing any particular good will increase at the same rate.
Correct A. society would consider additional units of shoes to be more valuable than alternative uses of those resources.
B. society would consider additional units of shoes to be less valuable than alternative uses of those resources.
C. society would experience a net loss by producing more shoes.
D. resources are being allocated efficiently to the production of shoes.
A. the aggregate or total levels of income, employment, and output.
Correct B. a detailed examination of specific economic units that make up the economic system.
C. positive economics, but not normative economics.
D. the establishing of an overall view of the operation of the economic system.
Correct A. make simplifying assumptions.
B. include all available information.
C. must use mathematical equations.
D. attempt to duplicate the real world.
A. conclude definitively that people buy more ice cream when the temperature rises.
B. state her findings as a well-tested economic principle.
Correct C. use the observed data to form a hypothesis about ice cream buying behavior.
D. throw out the data if it does not show a perfect relationship between buying habits and the other information she has collected.
A. shift of the production possibilities curve from CD to AB.
B. shift of the production possibilities curve from AB to CD.
Correct C. move from x to y on production possibilities curve AB.
D. move from y to x on production possibilities curve AB.
A. it is impossible to produce more consumer goods.
B. resources cannot be reallocated between the two goods.
C. it is impossible to produce more capital goods.
Correct D. more consumer goods can only be produced at the cost of fewer capital goods.
A. “A penny saved is a penny earned.”
B. “He who hesitates is lost.”
Correct C. “There is no such thing as a free lunch.”
D. “All that glitters is not gold.”
Correct B. Q2.
D. greater than Q3.
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